HomeMy WebLinkAboutMINUTES-06/07/1995-RegularJune 7,1995
Board of Directors of the Wastewater Utility Enterprise
Regular Meeting -12:35 a.m.
A regular meeting of the Board of Directors of the Wastewater Utility Enterprise was held on
Wednesday, June 7, 1995, at 12:35 a.m. in the Council Chambers of the City of Fort Collins City
Hall. Roll Call was answered by the following Boardmembers: Azari, Janett, Kneeland,
McCluskey, Smith and Wanner. Boardmember Absent: Apt.
Staff Members Present: Jones, Krajicek, Roy.
Ordinance No.1, Authorizing the Issuance of
Wastewater Utility Enterprise,
Sewer Revenue Refunding Bonds, Series 1995,
in the Aggregate Principal Amount of $13,835,000,
Adopted on Second Reading,
The following is staff's memorandum on this item.
r!r
The refinancing bonds were sold on May 22, 1995. The refinancing of the 1986 Sewer Bonds
resulted in a net present value of 4.9701c, exceeding the 3.0% threshold target. The gross monetary
reduction in debt service over the term of the bonds will be $864,830. Annual debt service will be
reduced by about $45,000 per year. The net present value of the projected savings over the
remaining life of the bonds is about $630,000. The sewer revenue bonds are not general obligations
(tax supported or secured) of the City of Fort Collins. They are payable from the operating revenues
of the water reclamation utility. Per the master agreement with Anheuser-Busch, the reductions in
debt service will also reduce payments from A-B to the City.
t uu!r
In August of 1986, the city issued $36,950,000 of Sewer Revenue Refunding Bonds. These bonds
refunded portions of three prior City issues, including the 1981, 1984, and 1985 bonds. All of the
prior bonds were defeased by the 1986 bonds. The 1986 bonds carried a rate of 7.27% at the time
of issue. A portion of the 1986 bonds were new bond proceeds to finance improvements to the water
reclamation treatment facilities. Market rates on May 22 provided a net effective interest rate of
approximately 5.43%. The lower interest rate will provide gross debt service savings of $864,830
over the remaining term of the bonds. In present value terms, this is a savings of about $630,000.
Ordinance No. 1, which was unanimously adopted on First Reading on May 16, 1995 provides
authority to the Interim City Manager to sign the bond purchase agreement after orders for the
bonds are taken.
0
June 7, 1995
BACKGROUND:
The 1986 Sewer Revenue Bonds, in the amount of $36,965,000, refunded the 1985 Sewer Revenue
bonds, which in turn were a refinancing of the 1981 and 1984 bonds and also some new money. By
refunding the prior issues, the City defeased, that is, funded sufficient escrows to pay all of the prior
bonds, and reduced its annual debt service costs. As of December, 1994, the City made its most
recent principal payment on the bonds, reducing the outstanding balance to $27,890,000. Due to
federal restrictions on refundings, only a portion of the outstanding balance, $12,705,000 were
included in the 1995 advance refunding.
The bonds were marketed on May 22, 1995, prior to second reading. The following table shows the
maturities, amount, coupon rate, and effective interest rate on the refunding bonds.
Year of Maturity
Amount
Coupon
Yield
1997
70,000
4.30%
4.30%
1998
70,000
4.40%
4.40%
1999
75,000
4.50%
4.50%
2000
75,000
4.60%
4.60%
2001
80,000
4.70%
4.70%
2002
85,000
4.80%
4.80%
2003
90,000
4.90%
4.90%
2004
95,000
5.00%
5.00%
2005
1,520,000
5.00%
5.10%
2006
2,220,000
5.125%
5.20%
2007
2,330,000
5.25%
5.30%
2008
2,465,000
5.375%
5.40%
2009
2,600,000
5.375%
5.50%
2010
1,810,000
5.375%
5.55%
The net interest rate on the bonds calculates to 5.43% with an average life of 12.8 years.
Staff estimates the following sources and uses of the bond proceeds:
Sources:
Principal amount of the bonds
$13,395,000
less discount
-107,961
Bond Proceeds
13,477,039
Accrued Interest
41,507
$13,518,546
5
June 7, 1995
Uses:
Estimated Cost of Escrow
$13,175,295
Underwriters Fee
111,669
Costs of Issuance
95,000
Debt Service Reserve Fund Surety
33,963
Bond Insurance
56,834
Accrued Interest
41.507
Contingency
4,279
Total Uses $13,518,546
Note: Totals may not add precisely due to rounding.
This is the first time that the City and the Wastewater Utility Enterprise issue refunding bonds under
the authority provided by the 1993 Charter Amendments. Staff recommended proceeding in this
manner to avoid any possible legal challenge to the refunding. If the Council were to have issue as
the City, there may be a challenge to the refunding issuance based on some wording of recent
Colorado Supreme Court cases. The cases state that revenue bonds and not considered debt for
purposes of Article X, Section 20. The Article expressly authorizes the refunding of debt from high
to low interest rates to achieve debt service savings. When the Court noted that revenue bonds may
not be included within the Article, bond counsel have advised that the City issue the refunding bonds
as an enterprise board to avoid this type of legal challenge."
Boardmember McCluskey made a motion, seconded by Boardmember Smith, to adopt Ordinance
No. 1 on Second Reading. The vote was as follows: Boardmembers Azari, Janett, Kneeland,
McCluskey, Smith and Wanner. Nays: None.
THE MOTION CARRIED.
Adjournment
There being no further business to come before the Board,
ATTEST:
City Clerk, Ex-Officio ecretary
Mayor, Ex-Officio
at 12:4U a.m.
0